Shipping and handling is the process of preparing and packing an order and then sending it to a customer. You will often see shipping and handling as a set of fees incurred on top of the order value and taxes. It covers logistics costs like labor, packing supplies, inventory storage, transportation, and delivery. Those are your handling costs. Terms and conditions, features, support, pricing, and service options subject to change without notice. By accessing and using this page you agree to the Terms and Conditions.
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Handling fees on the other side is all about the labour invested in packing, collecting inventory, generating shipping labels, obtaining appropriate packaging materials, loading and unloading, etc.
Here are three important factors that make up the shipping and handling costs for an order. They are :. Handling can be calculated as a product of an average number of minutes needed to pack an item divided by 60 and the employee hourly rate. The equation can be written as:. The packaging does incur a good cost, but it is worth investing in as you need to send the products rightly packed. You need boxes, packaging materials, tape and other things that need to make the item securely packaged. To get to know the overall expense on the same, you also need to figure out the cost of every such item that you need to use for securing the packing.
These charges will cumulatively make the shipping and handling costs. The packing also needs padded envelopes, small boxes which do incur some charges compared to the heavy boxes. Shipping cost is mostly calculated depending on the weight and dimensions of the item.
Yet another factor is the destination of the item being shipped, which does contribute to the overall shipping cost. You can make use of the shipping calculator , which can give you an estimated price for your item being shipped. Since shipping and handling are quite important factors to be considered when you are running an eCommerce store, you need to work on it diligently. If you are not managing it properly, your business reputation is at stake and also there are chances of cart abandonment, bad reviews and even a drop in sales eventually.
If you are handling a small scale business in a self-fulfilment manner and you do not need an inventory or a warehouse to store, then you can manage everything on your own, from packing to order fulfilment. The size of your business and the resources you use do influence the shipping and handling charges. If the order volume is comparatively less, then you can handle it on your own. But when the order number increases, handling will be tougher. Hence you might need a bigger warehouse and more employees to work with.
Shipping is directly related to the destination to which you are shipping. Hence it is important to consider your geographical location when you are calculating the shipping costs.
If you are centrally located in such a way that you can ship to anywhere easily you will be cutting down the cost that you are going to incur on shipping. The further the distance, the larger will be the amount you pay for the same. The next factor that affects the shipping cost is the items you sell.
If you are selling hazardous, temperature-sensitive, dangerous goods or medicines, then you are likely to invest more in the packaging, which means your shipping and handling cost is gonna be more. If you are shipping anything that requires dry ice, then you need to also add up the charges for dry ice when you are calculating the shipping cost. Unbiased, expert reviews on the best software and banking products for your business.
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Use our research library below to get actionable, first-hand advice. Customers often expect free shipping and handling, and businesses still need to account for these costs.
Cover expenses and meet customer expectations with these best practices. We may receive compensation from partners and advertisers whose products appear here. Compensation may impact where products are placed on our site, but editorial opinions, scores, and reviews are independent from, and never influenced by, any advertiser or partner. To charge, or not to charge, shipping and handling fees? That question plagues online business owners of all sizes. Additional fees can be deal-breakers.
Fee-free shopping is an increasingly common benefit online businesses use to woo customers away from competitors. The seller must still pay for the labor to package an order and the cost to ship it. For example, Chewy.
The membership includes additional incentives for choosing slower shipping methods and fewer shipments. Other companies offer free shipping and handling for smaller, lighter items but charge for heavier products. Ultimately, the best strategy is the one that fits your business based on your customers, your products, and the marketplace. Handling fees offset the expenses associated with storing, packing, and sending an order. Shipping and handling fees are technically separate costs.
Shipping is the price of sending an order through the mail or with another delivery carrier. Handling fees are the costs of the time and labor to prepare an order. Both are straightforward to figure out but require different approaches. Just substitute your hourly rate for the wage used in the example above. Shipping fees are one of the biggest overhead expenses for e-commerce businesses.
Prices also are based on the carrier. This handy online shipping calculator helps you find the cheapest way to send a package. Skipping this expense can negatively impact your bottom line. Passing shipping and handling fees along to the customer is a double-edged sword.
Doing so can simplify pricing, cover expenses, and increase opportunities for cross-selling. Without handling fees, the costs of shipping, packaging materials, and labor all get figured into the price of each product.
Adding handling charges as a subtotal line simplifies the pricing strategy for individual items. Charging for the time, effort, packaging, and shipping of orders helps ensure that all related costs are accounted for. Passing fees along to customers increases opportunities for larger sales volumes and overall profits.
Passing handling fees along to customers has its drawbacks, too. Consider the impact of lost sales, sales profits, and future lost opportunities that handling fees can create. Many customers now consider shipping and handling costs before adding items to their online shopping carts, according to the National Retail Federation NRF.
This sentiment was reflected in a NRF survey. Failing to take these customer sentiments into account could lead to lost sales that exceed the cost of free shipping and handling.
Fewer page views translate into fewer opportunities to convert a shopper into a sale. Online retailers often see free shipping and handling as a promotional tool to entice customers.
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